Secession vote looms

Tags:

Despite Vladimir Putin’s apparent attempt at rapprochement, pro-Russian separatists in eastern Ukraine insist their Sunday referendum on secession will take place, a move which could lead to civil war.

More signs of concern from Washington last night with Russian Foreign Minister Sergei Lavrov urging U.S. Secretary of State John Kerry to press Kiev to begin “direct, equitable dialogue” with its restive regions. In turn, Ukraine’s acting president and prime minister proposed a “round table” drawing in political forces and civil groups from all regions with international mediators helping out.

Putin’s motives are, as usual, opaque though it could be he hopes to avoid a third round of western sanctions – which would have to be much tougher – by calling on the separatists to suspend their vote on independence.

Washington and the EU have set any disruption of Ukraine’s May 25 national election as their red line. Putin has belatedly given rhetorical support to that vote. Today, Russia and Ukraine marks the anniversary of the defeat of Nazi Germany in 1945, a potent day. Prime Minister Arseny Yatseniuk said he suspected Moscow was planning some form of “skirmish” to discredit Kiev.

All this and more will be discussed by Germany’s Angela Merkel and France’s Francois Hollande today when they meet in the German seaside town of Sassnitz in the German Chancellor’s constituency. They are due to talk to the press at 1500 GMT.

They may be hoping that events in Ukraine will steer voters back towards mainstream parties at EU parliament elections in a fortnight. Despite ongoing divisions, it is clear the bloc will need to work more closely together to secure its energy supplies into the future.

Russia has confirmed it will demand advance payments for gas from Ukraine starting in June, saying it already owes $3.5 billion. Kiev has said it won’t do that. Russia’s Gazprom supplies about 30 percent of the gas consumed in Europe, shipping about half of that via Ukraine.

German trade data, just out, showed exports posted their biggest fall in nearly a year in March and imports also dropped, countering recent more positive statistics.

Early today, S&P raised its outlook on Portugal’s ‘BB’ rating to stable from negative following its exit from a three-year bailout programme and a successful return to the bond market. Moody’s may deliver its own verdict later though it has a patchier record of meeting its release calendar.
Fitch has affirmed the ‘AAA’ rating of Switzerland, Kazakhstan at ‘BBB+’ and Georgia at ‘BB-‘.

British Deputy Prime Minister Nick Clegg, leader of the Liberal Democrats who rule in coalition with the larger Conservatives, speaks at Reuters HQ in London. His party faces a drubbing at the EU elections while the anti-EU UK Independence Party rides high and he is virtually a lone voice in the British political sphere making the case loudly for Britain’s place in Europe.

Prime Minister David Cameron has pledged to repatriate some powers from Brussels and then offer an in/out referendum in 2017. Clegg will dismiss his coalition partner’s strategy as wishful thinking which is aimed primarily at internal Conservative divisions and say Germany, France and others would never let Britain pick and choose which of the EU’s rules it wanted to adhere to.

Conservative eurosceptics will not be content with anything short of withdrawal, he will warn, and that the way to reform the bloc was to engage and build alliances.

Finland’s Social Democrats, the parliament’s second-biggest group, is due to vote on whether Jutta Urpilainen, the government’s finance minister, will continue as the party leader. If she falls, the likely beneficiary would be Antti Rinne, a union boss known for favouring state-led economic growth, to head the party and probably the finance ministry.

Rinne would be unable make major policy changes in the five-party government whose term will end in less than a year, but analysts have said his presence could complicate the coalition’s efforts to implement its earlier reform plans.

Author Profile

Based in London, I run the economics, economic policy and markets cover from the EMEA region. Previously, I was Chief UK Political Correspondent for seven years and have also been economics correspondent as well as holding general news and market reporting posts over a 20-year career.